Oil halts rally on IEA warning

Agency sees explosive growth in US oil supply this year

LONDON: Oil slipped as the International Energy Agency became the latest group to forecast a sharp increase in US production.

Futures in New York tumbled as much as 1.7% before paring losses, as they head for the first weekly decline since mid-December. The Paris-based IEA said it sees “explosive” growth in US oil supply this year after an “exceptionally tight” period for crude markets at the end of 2017.

The Organisation of Petroleum Exporting Countries (Opec) and the Energy Information Administration also recently boosted their outlooks for American production.

Oil’s rally has faltered after two annual increases on speculation that the surge in prices may have been overdone. Banks including Citigroup Inc predict the deal Opec between and its allies will begin winding down from the middle of the year as they achieve their aim of reducing a global surplus.

Still, ministers from the United Arab Emirates, Iraq and Kuwait have insisted there’s no need to change tack.

The IEA’s report is “adding to the current theme of non-Opec growth at these levels,” says Ole Hansen, head of commodity strategy at Saxo Bank A/S. “It’s another reason to be cautious about getting too carried away with oil.”

West Texas Intermediate for February delivery fell 50 US cents to US$63.45 a barrel on the New York Mercantile Exchange as of 12.29pm in London. Total volume traded was about 30% higher than the 100-day average. Prices are down 1.3% this week.

Brent for March settlement dropped 59 US cents to US$68.72 a barrel on the London-based ICE Futures Europe exchange. Prices are down 1.7% this week and are set for the first weekly drop this year. The global benchmark crude traded at a premium of US$5.32 to March WTI.

The IEA raised its forecast for US oil production growth this year by 240,000 barrels a day to 1.35 mil- lion barrels, putting it on track to surpass Saudi Arabia and rival Russia. US output rose by 258,000 barrels a day last week to 9.75 million, the Energy Information Administration said Thursday. Oil-market news:

> Kazakhstan’s Kashagan oil field resumed output yesterday after a power disruption on Jan 15, followed by a halt to an offshore power plant two days later.

> US drillers may boost spending and oil production after the recent gain in prices, leading to an over-correction, ConocoPhillips chief executive officer Ryan Lance said in an interview in Houston on Thursday. — Bloomberg